Crypto is treated as ‘property’ by IRS

Rick Klee
Ken Milani

While filing my income tax return using software, a question about virtual currency was asked. Can you write a column about income tax outcomes related to virtual currency?

— RM, email

Virtual currency is also known as cryptocurrency. According to most financial historians, digital currency began to gain traction in the last 15 years and its growth has been impressive. We’ll turn to a February 2022 Reader’s Digest article, “Our Two Cents on Cryptocurrency” (pages 28-31) for a succinct – and somewhat understandable – summary of this new form of payment which is sold by companies such as Bitcoin, Ethereum, Binance Coin, Coinbase, Dogecoin, Tether and others. Quoting the Reader’s Digest original article:

“Most cryptocurrencies work using block-chain technology, a type of data base that serves as a permanent ledger for transactions . . . their value is based on the activity of their users. The more ‘coins’ people buy, the more those coins are worth.  . . . One way to earn cryptocurrency is through mining but it’s an intensely complicated process that releases new coins into circulation using advanced computer equipment (just like other mined materials, the total amount of some cryptocurrencies is finite.) So the way most people get their cryptocurrency is by buying it on online exchange platforms.  . . . Businesses that allow customers to pay with crypto include PayPal, Tesla and Xbox .  . . . Even . . . charities, including The Water Project, The Red Cross and Save the Children, accept donations made in cryptocurrency.” 






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